On October 4, 2004, the idea of incentive prizes hit the mainstream when Burt Rutan and his team at Scaled Composites launched SpaceShip One into orbit for the second time and won the $10 million Ansari X Prize.

Since then, prizes like that have become more and more common, and though the X Prizes are still the gold standard, there are now similar competitions from medical research to science to business, and beyond.

Not long ago, however, the U.S. government got into the business (PDF) of using competitions like these to come up with new ways to solve existing problems. You might think that something as big and bureaucratic as the government wouldn't be able to make such programs work, but with the 2010 passage of the America COMPETES Act, the Obama Administration and Congress helped to ensure that problems big and small could potentially be solved by implementing a system that has been proved effective again and again at bridging the gap between innovative thinkers outside normal channels and those needing their solutions.

White House Assistant Director for Grand Challenges Cristin Dorgelo
The White House

The White House knows it needs people with experience to help lead the government's adoption of incentive prizes. And last February, it hired Cristin Dorgelo, who formerly ran prize operations for the X Prize Foundation, to be assistant director for its Grand Challenges program.

Today, Dorgelo, along with a who's-who of luminaries in the incentive prize field, will be the featured speakers at an event in Washington built around furthering discussion and understanding of how to implement incentive prizes in government. Yesterday, Dorgolo spoke with CNET about the event, and how prizes like this can help government be more effective and efficient.

Q: Could you start by explaining today's event?
Cristin Dorgelo: The event is called Collaborative Innovation: Public Sector Prizes. It's a one-day forum where people from the public sector and federal agencies, as well as private-sector corporation and nonprofit representatives are getting together to talk about high-impact incentive prizes and challenges and best practices, and lessons learned for running them, particularly from the point of view of the government prize administrator.

The big question is, Why is the administration implementing incentive prizes?
Dorgelo: Incentive prizes are part of President Obama's strategy for American innovation. They're one tool in a federal agency's toolbox for getting outside thinking, new ideas, and solutions for long-standing problems into federal agencies. Over the last couple of years, there's been growing use by federal agencies of the incentive prize model as a way to engage in a highly financially leveraged way as well as a way to engage with new solvers that would not normally come through a government procurement or grant process.

Most people are familiar with the X Prizes, but what are some of the big successes so far for public sector prizes?
Dorgelo: There's a few to call out. First, some agencies already had the authority to run incentive prizes. That includes NASA, and they've partnered with the TopCoder on their NASA Tournament Lab, where they're getting developers working on software and algorithm solutions to longstanding problems. NASA's Space Life Sciences Directorate has partnered with InnoCentive to create ideas and potential solutions for longstanding space life sciences challenges. Those two NASA groups have also combined to create the Center of Excellence for Collaborative Innovation, where NASA prize administrators and their colleagues at Harvard Business School are going to help federal agency peers who are new to running prizes design and administer competitions.

The Air Force Research Laboratory had a competition where they asked for a solution for how to stop a fleeing vehicle at a checkpoint, where you don't want to harm those in the car, or more importantly, those trying to stop the car. This was a longstanding military problem. They put up a relatively small purse, and in less than 60 days, they had a potential solution from a retired engineer in Lima, Peru. The Air Force Research Laboratory certainly wasn't previously engaging with that type of solver. We've seen similar things like NASA conducting a competition for new approaches and algorithms for mapping dark matter. And they did that in the Kaggle predictive modeling community. They got submissions from people with backgrounds in glaciology and handwriting analysis who had related approaches within their fields. It's exactly that sort of outside thinking that we're looking for in these public sector prizes.

Are some agencies better suited than others to conducting incentive prizes?
Dorgelo: NASA and the Air Force are two of three agencies (the other is the Department of Energy) that have longer standing authority to conduct prizes. But the passage of the America COMPETES Act of 2010 extended that authority to all federal agencies, giving very broad authority to conduct prizes up to $50 million, as well as to conduct them in partnerships with nonprofits and private corporations. Now that new agencies are conducting prizes, we're seeing really interesting use of prizes from agencies like Health and Human Services, which tied incentive prizes and challenges into its Open Health Data Initiative. We've also seen the Veterans Administration conducting the Blue Button prize where they looked to get more access to health data for veterans and the general public through health providers. They reached hundreds of thousands of doctors offices and patients through that competition.

The original X Prize offered a $10 million prize. What would a $50 million prize look like?
Dorgelo: When I talk to both public and private sector prize administrators, I encourage them to be smart about their incentives, in that a bigger prize isn't always the right prize. It depends on the problem. One of the largest prizes to date is the $30 million Google Lunar X Prize, and that purse is appropriate because the cost of these missions to the moon range from $10 million to $50 million. But we're seeing really interesting approaches to much smaller prize purses. For example, two weeks ago, the Center for Medicare and Medicaid Services launched a $500,000 competition on TopCoder. It's broken into a set of milestones where software developers will create a replacement for Medicare and Medicaid provider screening software. If that's successful in replacing the current screening software, it's going to be a really interesting approach to government IT sourcing. These types of incentives show it doesn't necessarily have to be a $10 million purse to create big impact.

What kind of lessons from private sector incentive prizes have worked so far for the public sector?
Dorgelo: First, being smart about problem definition is absolutely critical, because you really do get what you incentivize. We encourage public sector prize administrators to look first at their strategic mission and identify gaps where a prize might make the most sense and impact. Second, you need to think through your marketing and outreach strategy. It's a noisy media environment, with lots of prize platforms out there.

What doesn't work?
Dorgelo: When offering a prize, it's vital that agency, as well as private sector, prize administrators think through everyone's proper role. Sometimes, it will make sense for government to be the prize host or sponsor, and other times it makes sense for the prize to be conducted by a third-party prize administrator, and for government to support. For example, the Wendy Schmidt Oil Cleanup X Challenge was sponsored by the X Prize Foundation but was conducted at a Department of the Interior facility, and NOAA and retired Coast Guard representatives were judges.

Why did you want to take this role at the White House after being at the ground zero for incentive prizes for so many years?
Dorgelo: I loved working with market stimulation prizes that are high impact and take multiple years. But I'm also really interested in learning about how incentive prizes can be used in new ways. For example, I'm seeing a trend of organizations and federal agencies thinking about how to use incentive prizes as a way to impact the later stages of the innovation chain, to impact things beyond simply technology ideation and demonstration, and instead look at adoption and scale and viability within the market. And things like behavior change. So one of the competitions we'll be looking at today is the Nesta Big Green Challenge, from the U.K., where communities looked to decrease carbon emissions. Or the Aspen Prize for Community College Excellence, which looks to compare community college practices and share what's working.

It's almost like there's a wisdom of the crowds element to incentive prizes. Does that ring true?
Dorgelo: Certainly there's access to new solvers. I would also say that we're often surprised by the degree of collaboration that happens within these competitions. Often there will be team networking events, or on some of the online communities there will be leader boards so people can keep track of what other teams are developing and what they're doing. And that really helps to bubble up the most robust solutions, and to build not just one winner, but a community of solvers that are really interested in pushing a particular area of research or a particular industry and area of technology development forward. I like that balance between collaboration and competition, and I've seen it in every competition I've been engaged with.

What have you been most surprised by?
Dorgelo: I've been pleasantly surprised by the thoughtful and strategic use of this tool as one in a toolkit. It's not always the right solution, but sometimes it's a very interesting thing for agency personnel to experiment with and get new ideas from. I've also been very pleasantly surprised by the diversity of approaches to prizes, and that we're seeing not just science and technology point solution prizes but also participation prizes, exposition prizes, and other interesting formats of approaching the construction of an incentive prize. And we've seen agencies like NASA partnering with researchers at schools like Harvard Business School and taking a close look at what's working, and why, within these competitions.

What are you most proud of so far?
Dorgelo: The fact that there's been more than 150 competitions from over 40 agencies to date. And I'm also really excited about seeing agencies like Health and Human Services providing agencywide guidance as well as delegation of authority related to prizes. And really embracing this as part of their strategy for innovation. And I think when it is owned at the program level within federal agencies, we're going to see some really interesting strategic uses of the tool over the next couple of years.